Nashville’s Largest Banks (by market share)

Regions Bank and Bank of America, Nashville’s two largest banks, reported smaller deposits and a shrinking market share as Pinnacle National Bank, First Tennessee Bank and CapStar Bank saw the biggest gains in the past year, according to a Federal Deposit Insurance Corp. report released Monday.

Local deposits in Birmingham, Ala.-based Regions fell 10.5 percent to $6.4 billion, while market share declined 2.2 percentage points to 15.8 percent as of June 30, compared to the same date in 2012.

Deposits in Bank of America, based in Charlotte, N.C., fell 2 percent to $6.65 billion in the Nashville area; its local market share dropped 0.6 percentage points to 16.3 percent.

“The market share (smaller banks) have gained has come primarily at the expense of the large banks, where they have been able to either out-hustle those large banks for business or hire their key employees, who bring their customers with them,” said Jeff Davis, managing director of Mercer Capital’s Financial Institutions Group in Nashville.

Small banks grow

The annual report, which captures deposits as of June 30, reflects the ability of the smaller, newer banks — such as Pinnacle Bank, Avenue Bank and CapStar — to compete against larger banks and establish themselves in the past decade.

“Pinnacle has become a more effective local bank,” said Peyton Green, a managing director at Sterne Agee in Nashville. “As they have grown, they have been better at gaining local share. In a community like this, customers want a bank with someone who can give them a local answer as opposed to a lot of the super regional banks and regional banks that consolidated their operations to places out of the market.”

Pinnacle’s market share gains make the bank “very attractive” as an acquisition candidate for a bank seeking to add to its presence in Middle Tennessee or enter the market, Green said.

Pinnacle CEO Terry Turner said the market share gains reflect the company’s original focus, which is to compete with the larger regional banks. The bank has grown to 29 offices in the Middle Tennessee area, with four offices in Knoxville.

“We built this company primarily to compete with large regional banks and to compete with them based on our service and the depth of our relationship with our clients,” said Pinnacle CEO Terry Turner.

CapStar, which closed on a deal to buy American Security Bank & Trust in Hendersonville in July 2012, had the second largest market share gain, climbing to 2.25 percent from 1.69 percent the previous year. The bank, led by CEO Claire Tucker, had $916.6 million in deposits as of June 30, a 35 percent increase in deposits from the same date in 2012.

Deposits increase

The FDIC report reflects the overall growth in deposits in recent years as consumers and businesses are operating more conservatively and storing more cash. Overall deposits in the Nashville area were $40.8 billion on June 30, compared to $32.8 billion in 2008, FDIC data show.